• The report names four megatrends in the industry that support its thesis.

• Cowen has initiated coverage on five stocks in the space.

Cowen & Co has initiated coverage on five Process Control and Automation stocks. In a new report, analyst Joseph Giordano explains why the firm is bullish on the industry.

Durable, Secular Trends

Giordano believes that Process Control and Automation has a rapidly-expanding addressable market as the world continues its shift to tech-centric business.

“We expect a trend towards lighter asset bases as higher margin software and cloud based solutions foster a tech angle in the industry as the advent of the blossoming Industrial Internet of Things creates a largely untapped trove of information to be analyzed and applied,” Giordano explains.

Megatrends

The report also lists four megatrends underlying Cowen’s long-term sustainable growth thesis. The list includes the following trends:

1. Connectivity

2. Higher volumes

3. A drive for efficiency

4. Wage pressures

Giordano believes that these trends will persevere as the business world continues to search for ways to use technology to “do more with less.”

The Numbers

Cowen surveyed about 300 international and domestic companies to get a feel for how much emphasis they are putting on automation spending. According to the report, nearly 90 percent of respondents expect automation spending growth in the next two years. In China, more than 80 percent of companies expect to see annual automation spending growth upwards of 5.0 percent.

Stock Picks

Cowen names Outperform-rated Cognex Corporation (NASDAQ: CGNX) and Roper Technologies Inc (NYSE: ROP) as its top two stock picks in the automation space.